Are Scottish Trust Deeds a Government Approved Debt Solution?
Will a Trust Deed Affect My Credit Rating?
Yes. A Trust Deed will normally have a significant effect on your credit rating. Details about personal insolvencies remain on your credit rating for six years, for example. Other types of debt arrangements may also have a negative effect on your credit rating. You can read more about how your credit file might be affected here.
Is There a Minimum Debt Level?
The minimum level of debt to qualify for a Trust Deed is £5,000. Some Trust Deed providers will require higher levels of debt to take on your case. Comparatively low debt levels might sometimes be better addressed via the debt arrangement scheme or sequestration (bankruptcy).
How Long Will It Take To Set Up?
In could take as little as six weeks for a Trust Deed to be set up and for it to become protected. However, this period of time will vary according to individual circumstances. A statutory five week period exists for creditors to consider the terms of Trust Deeds and during this period they have the opportunity to approve the arrangement or to make objections.
How Long Will It Last?
For most people it will be four years before discharge becomes possible, but there are circumstances where the term of a Trust Deed might be increased. It’s now not possible to be discharged earlier than four years unless the included debts are fully repaid (in addition to the provider’s fees and interest on the debts).
What Are The Alternatives?
What Does ‘Protected’ Mean?
Your insolvency practitioner writes to your creditors with details of your proposed trust deed. The creditors have five weeks to support or reject your proposals. Provided few creditors raise objections, your Trust Deed will become protected. This means that all relevant creditors are bound to the terms of the protected Trust Deed (whether they accepted or rejected it) and that none of them can take any kind of legal debt recovery action against you. Effectively, a protected Trust Deed keeps you protected from your included creditors, provided you keep to your commitments.
Will I Be Debt-Free When I’m Discharged?
Provided you have included all unsecured creditors in your Trust Deed - which you must do, have not taken on further debt, and have met your commitments to your Trust Deed, you will usually be completely free of unsecured debt following your discharge. (Please note that these types of debt arrangements do not generally include secured debts, such as mortgages or hire purchase agreements. A small number of other types of debt might be excluded from the usual Trust Deeds processes. This includes (but is not limited to) certain debts that are already subject to diligence, official student loans, and some social security overpayments.)
Who Pays the Fees?
The fee amount is agreed with your trustee and creditors at the start of the process. These fees are drawn by your insolvency practitioner from the money that you are required to contribute into the arrangement.
Are Trust Deeds Just for Homeowners?
No. Trust Deeds are available to homeowners, tenants and those who live with friends or family.
I’m A Homeowner – Will I Lose My Home?
Not usually, but the situation for each and every homeowner is different. It’s extremely important to get a full written explanation from the trustee about how any equity in your home will be dealt with before you sign the Trust Deed. Don’t accept verbal promises. Make sure you have written proof in your possession about exactly what has been agreed. If you’re thinking about starting a trust deed and you have questions about what could happen to your home, speak to one of our experts.
Will I Have to Sell My Car?
Not usually, but the situation may vary according to your personal circumstances. There shouldn’t be an issue with you retaining the use of a vehicle you own, provided that you have a reasonable need for it. However, if your car is worth more than £3,000 the situation may be a little more complex and we suggest you get written confirmation from your trustee about how the vehicle will be dealt with before you sign a Trust Deed.
Will My Personal Possessions Be Taken Away?
No. Regular personal possessions (items without exceptional value) will not be taken from you.
What Debts Can be Included?
You must include all unsecured debts. These might be credit cards, overdrafts, bank loans, payday loans, catalogue debts, and so on. Trust Deeds will not usually include secured debts, such as mortgages, secured home loans or hire purchase agreements. Usually, you should continue to pay secured debts in full to avoid the risk of repossession. (Please note student loans cannot be included, nor can certain types of social security overpayments.) If you’re not sure whether your debts are secured or unsecured, one of our advisers can help.
What Happens If My Circumstances Change?
If your circumstances improve you might be required to increase your monthly payment. If your circumstances worsen you may be able to reduce or suspend your monthly payment. If you come into money (for example, from an inheritance) you are likely to be required to pay this lump sum to your trustee – they’ll use this to pay back more to your creditors.
What Happens If I Come Into Money?
If you receive or become entitled to some type of windfall it’s likely you’ll have to pay it over to your trustee. Windfalls might include inheritances, lottery wins, and certain types of redundancy payments. Any money paid over will usually be used to repay your creditors more.
Can I Borrow While I’m In a Trust Deed?
There’s usually no rule preventing you from doing so, but please remember that repayments for new debts will probably be unaffordable. Your trustee is highly unlikely to provide you with any allowance to manage them. Please also remember that new debts cannot be included in your Trust Deed. It’s likely that any new borrowing you were granted would be on expensive repayment terms due to the effect on your credit rating of a trust deed.
What If I Want To Complain About My Trustee?
Firstly, you should raise any concerns you have with your trustee directly. If you’re still unhappy then you can raise the matter with the trustee’s professional regulatory body. You could also raise the matter with the Accountant in Bankruptcy (this government agency oversees the trust deed process in Scotland).
Where Can I Get Good Debt Advice?
There are numerous sources of debt advice, some much more reputable than others. You could make an appointment with the Money Advisers employed by your local Citizens Advice or Local Authority. There are also several debt charities you could contact. Or you can speak directly with one of our qualified debt advisors. Just click here.
Where Can I Ask Another Question?
You can contact our very qualified (and very friendly) advice team by calling 0141 249 0416 or 0800 043 7201, or by using one of the contact forms here. You can also ask our experts a question in the online forum. We’re always here, and always happy to help.